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Tennessee to Modernize Revenue with Click-Through Nexus

  • Apr 27, 2015 | Gail Cole

 Tennessee ready to change remote sales tax law.

Update, 5.21.2015: The Revenue Modernization Act was enacted on May 20.

All signs indicate that Tennessee Governor Bill Haslam will soon sign the Revenue Modernization Act into law. The governor spoke of the fact that "Tennessee has fallen behind other states in protecting our in state businesses from unfair competition from out of state companies" in his 2015 State of the State Address. "To remedy that," he said, "We will file the Revenue Modernization Act, which aims to level the playing field in terms of sales tax and business taxes." Now he has the opportunity to turn the promise of that law into a reality.

Under HB 644, “click-through nexus is presumed” if:

  • A dealer has a “representative, agent, salesperson, canvasser, or solicitor operating in this state for the purpose of making sales” and if:
    • “The dealer enters into an agreement or contract with one (1) or more persons located in this state under which the person, for a commission or other consideration, directly or indirectly refers potential customers to the dealer, whether by a link on an Internet website or any other means; and
    • The dealer’s cumulative gross receipts from retail sales made by the dealer to customers in this state who are referred to the dealer by all residents with this type of an agreement with the dealer exceed ten thousand dollars ($10,000) during the preceding twelve (12) months.”

Substantial nexus will also be triggered for franchise and excise taxes when a taxpayer “has a bright-line presence” in Tennessee – when one of the following is true:

  • The taxpayer’s total receipts in Tennessee during exceed the lesser of five hundred thousand dollars or twenty-five percent of the taxpayer’s total receipts everywhere during a defined tax period.
  • The average value of the taxpayer’s real and tangible personal property owned or rented and used in this state during the tax period… exceeds the lesser of fifty thousand dollars or twenty-five percent of the average value of all of the taxpayer’s total real and tangible personal property; or
  • The total amount paid in this state during the tax period by the taxpayer for compensation… exceeds the lesser of fifty thousand dollars or twenty-five percent of the total compensation paid by the taxpayer.”

The new nexus provisions are set to take effect on July 1, 2015, “the public welfare requiring it.”

Federal lawmakers have yet to reach consensus on remote sales tax legislation. A growing number of state lawmakers are therefore taking matters into their own hands. Is your business prepared to collect and remit sales tax in multiple states? Automated sales tax Software-as-a-Service can help. Learn more.

photo credit: Three forces distrupting management via photopin (license)

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.